Banco Santander Chile presents its unaudited results for the fourth quarter of 2008. These results are reported on a consolidated basis in accordance with Chilean GAAP, in nominal Chilean pesos.
In 1Q09, net income attributable to shareholders totaled Ch$76,652 million (Ch$0.41 per share and USD0.72/ADR). In 2009, the Bank adopted accounting standards in line with international standards and historical figures in the rest of this report have been re-stated to make them more comparable. The main difference compared to previous accounting standards was the elimination of price level restatement. Compared to re-stated net income, 1Q09 net income decreased 10.9% YoY.
On a comparable distributable basis, that is, compared to historical net income distributable as dividends and not restated to account for new accounting standards, net income attributable to shareholders was up 1.3% YoY. The Bank’s ROAE in the quarter reached 20.2%.
Operating income increased 18.6% compared to 1Q08 (from now on YoY). Net interest income was flat YoY and totaled Ch$187,273 million in the quarter. The negative inflation rates in the quarter placed pressure on the net interest margin as the Bank has more assets than liabilities linked to inflation. As a result, in 1Q09, the Bank’s net interest margin reached 4.8% compared to 5.6% in 1Q08. The effects of lower inflation on margins were offset by the 16.6% YoY increase in average loans coupled with our continued focus on spreads. As a result, client net interest income, that is net interest income generated by our commercial areas, increased 11.3% YoY in 1Q09.
Net fee income 5.2% YoY in 1Q09 and was led by a rise in fees from checking accounts and card fees. Fees from checking accounts and lines of credit increased 15.3% YoY in the quarter. Santander is the leader in the checking account market with 630,000 accounts and 27.0% of the market. Fees from credit, debit and ATM cards increased 6.8% YoY. In the banking credit card business, Santander, with 33.5% of the credit card accounts, generated 36.3% of all purchases in 1Q09 compared to 35.3% in 1Q08. In the ATM market, Santander, with approximately 30% of the ATMs installed in the country, generated 41% of the total transactions in 2008.
In 1Q09, the Bank’s net provision expense increased 48.0% YoY. This rise was driven by the increase in charge-offs, in line with the economic slowdown. As a result of this rise in charge-offs, asset quality indicators remained stable. The expected loan loss ratio or risk index (Loan loss allowances / Total loans) reached 2.01% as of March 2009 compared to 1.88% at year-end 2008 and 1.90% as of March 2009. This is a key asset quality indicator as it determines the bank’s required level of reserves and provisions. The Bank is required to have 100% coverage of its risk index. The past due loan ratio (Unpaid loans & installments >90 days / Total loans) as of March 2009 reached 1.21% compared to 1.10% in 4Q 08 and 1.09% in March 2008. The coverage of past due loans (Loan loss allowance / Past due loans) reached 166.2% as of March 2009.
In the retail side, total loans to individuals decreased 1.8% QoQ and increased 8.9% YoY. The growth of lending to individual was focused mainly on the middle-upper income segments, which increased 2.5% QoQ and 31.7% YoY. In the mass consumer market volumes decreased 10.4% QoQ and 25.3% YoY. Lending to SMEs decreased 3.5% QoQ and increased 8.4% YoY. Lending to the middle market decreased 5.8% QoQ and increased 8.4% YoY. Corporate loans decreased 20.5% QoQ and increased 10.4% YoY. The main reasons for these declines were the translations losses produced by the deflationary environment and the appreciation of the Chilean peso.
As of 31 March 2009, Santander Chile’s loan to deposit ratio (excluding portion of mortgage loan funded through bonds) reached a healthy 96.5%, improving from 91.4% at March 2008. As of March 2009, 70% of our total liabilities were core funds (defined as retail deposits, long-term institutional deposits and long-term bonds). This clearly reflects our strategic objective of maintaining healthy liquidity and a strong funding base.
The Bank’s capitalization ratios improved in the quarter. As of 31 March 2009, the Bank’s BIS ratio reached a solid level of 15.0% with a Tier I ratio of 11.0%. It is important to point out, that voting common shareholders’ equity is the sole component of our Tier I capital. This is in line with our strategic objective of maintaining a strong core capital base.
The Bank credit risk ratings were improved in the quarter by Moody’s, following their upgrade of Chile’s sovereign ratings.
L.D.